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WILLIAM T. NEARY
UNITED STATES TRUSTEE
1100 Commerce, Room 976
Dallas, TX 75242
(214) 767-8967; FAX (214) 767-8971
Lisa L. Lambert
Trial Attorney, TX 11844250
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
IN RE: §
§
SILVEROAK HOLDINGS, LTD. § CASE NO: 09-33211
d/b/a Bob’s Steak and Chop House § Chapter 11
Debtor-in-Possession § Hearing Date: Aug. 10, 2009
§ Hearing Time: 9:00 a.m.
The United States Trustee for Region 6 moves the Court to order the appointment of a
chapter 11 trustee in the Silveroak Holdings, Ltd.’s bankruptcy case. In support, the United States
Overview
Under the Bankruptcy Code a trustee must be appointed to administer a chapter 11 case if a
debtor cannot properly fill the role of debtor in possession. In this case, Silveroak Holding, Ltd.
(Silveroak) operated the Bob’s Steak and Chop House, and the management is an individual who is
subject to indictment for a first degree felony, who has invoked the Fifth Amendment at the
creditors’ meeting rather than testify about the use of $300,000, and who has inherent conflicts of
interest arising from the potential purchase of the Debtor’s assets. “Cause” exists to direct the
United States Trustee to appoint a chapter 11 trustee. Furthermore, directing the appointment of a
chapter 11 trustee serves the “interests of creditors” by assuring that fiduciary duties are honored.
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Factual Statement
1. Robert (“Bob”) Sambol is one of the two original founders of Bob’s Steak and Chop
House, which is the assumed name for Silveroak Holdings. Silveroak Holdings filed a voluntary
2. On May 28, 2009, and on June 12, 2009, the Court held hearings on the Debtor’s
financing, use of cash collateral, payment of pre-petition claims, and banking requests. During these
hearings, Sambol testified that he was now the only equity holder in Silveroak which was
incorporated to hold and operate the Bob’s Steak and Chop House on Lemmon Avenue.
3. Based on news articles and Sambol’s testimony at the first day hearings, Lee
Thompson contends he invested $300,000 for a wine or cigar bar and that he obtained an equity
4. According to the Dallas County Criminal Background Search Service, Sambol has
http://www.dallascounty.org/criminalBackgroundSearch/defendant_detail.do?ln=03.
restructuring officer. The proposed chief restructuring officer’s employment application is pending.
holding a ten percent in the Debtor, and Sandol is a limited partner with a ninety percent interest.
7. The other founder of Bob’s Steak and Chop House incorporated the Lenox
Restaurant Group, Inc. (“Lenox”), and Lenox now franchises Bob’s Steak and Chop Houses.
8. With court approval, Lenox has provided funds to the Debtor during the post-
9. Sambol and the Debtor’s counsel have indicated that they contemplate selling the
10. Lenox has indicated that it will participate in bidding on the Debtor. As Sambol and
Lenox have a lengthy history, it is likely that Sambol will negotiate a position for himself when the
Debtor is sold.
11. In addition, at the creditors’ meeting, Sambol testified that another bidder was
interested in acquiring the Debtor, using another name, and retaining Sambol.
12. While one cannot predict who will bid, other Bob’s Steak and Chop House
franchisees or other restauranteurs may be interested in acquiring the Debtor but not in retaining
Sambol.
13. Under the Bankruptcy Code the court must direct the appointment of a chapter 11
trustee when “cause” exists or when “such appointment is in the interests of creditors.” 11 U.S.C.
§1104(a)(1),(2). “Cause” exists for the appointment of a chapter 11 trustee. First, the indictment
and inability to testify about the use of the $300,000 is “cause, including fraud, dishonesty,
1
Because Sambol controls the Debtor, the U.S. Trustee’s filing of this motion is compelled by 11 U.S.C. § 1104(e). That subsection
requires that the U.S. Trustee move for the appointment of a trustee under § 1104(a) if he has “reasonable grounds to suspect” that either
appointing a trustee is the only effective way to pursue a reorganization or liquidation. Third,
“incompetence” or “gross mismanagement.” Combined with the indictment, questions of fraud and
14. The Fifth Circuit has held that “cause” exists when appointing a chapter 11 trustee
“is the only effective way to pursue reorganization.” Cajun Elec. Power Coop., Inc. v. Central La.
Elec. Coop., Inc. (In re Cajun Elec. Power Coop., Inc.), 74 F.3d 599, 600 (5th Cir.) (adopting on
rehearing the opinion of dissent in 69 F.3d 746, 751), cert. denied, 519 U.S. 808 (1996); see also In
re Marvel Entertainment Group, Inc., 140 F.3d 463 (3d Cir. 1998) (adopting reasoning of Cajun
Electric. and affirming appointment of trustee when acrimony between debtor’s management and
15. In chapter 11, the debtor serves as the debtor-in-possession. 11 U.S.C. §1107. To
proceed to confirmation, the Debtor would have to file a disclosure statement with adequate
provide adequate disclosure, the Debtor would need to discuss the criminal proceedings and their
Amendment at the creditors’ meeting, Sambol cannot meaningfully make such a disclosure without
the debtor’s top management or the members of the governing body that selected the debtor’s top management participated in “actual
fraud, dishonesty, or criminal conduct in the management of the debtor.” 11 U.S.C. §1104(e). Where, as here, the membership of the
board of directors continues to be controlled by a former manager who is suspected of having engaged in serious misconduct, it makes
little sense to rely upon the existence of that board as a barrier between current management, including a chief restructuring officer, and the
management.
16. Moreover, Sambol’s desire to preserve his own employment conflicts with his duty
to maximize value for the estate, and he has a prior relationship with potential purchasers. This
situation presents a conflict of interest. Frost Bank, a pre-petition lender, has already expressed
concerns about whether selling to Lenox would maximize value to the estate. A chapter 11 trustee
is the only effective way to promote confidence in the transparency of the sale.
17. Alternatively, the Court must order the appointment of a chapter 11 trustee because
the appointment will insure that Bankruptcy Code duties and powers are performed by a properly
empowered person. This resolution “is in the interests of creditors.” 11 U.S.C. § 1104(a)(2). The
“interests of creditors” standard is flexible. In re Marvel Entertainment Group, Inc., 140 F.3d 463,
18. As reflected by Frost Bank’s dispute regarding Lenox’s bidding on the Debtor, the
Conclusion
administrator at the helm.” Cajun Elec. Power Coop., Inc. v. Central La. Elec. Coop., Inc. (In re
Cajun Elec. Power Coop., Inc.), 74 F.3d 599, 600 (5th Cir.) (adopting on rehearing the opinion of
dissent in 69 F.3d 746, 751), cert. denied, 519 U.S. 808 (1996). Whether the Court orders the
appointment “for cause” or for the “interests of creditors” and the public, the facts mandate the
WHEREFORE, the United States Trustee respectfully requests that the Court enter a final
order granting this Motion, requiring the United States Trustee to appoint a chapter 11 trustee, and
Respectfully submitted,
WILLIAM T. NEARY,
UNITED STATES TRUSTEE
Certificate of Service
I, Lisa L. Lambert, certify that on July 14, 2009, I mailed a copy of the U.S. Trustee’s
Motion to Appoint a Chapter 11 Trustee to the parties on the attached service list and on those
requesting notice through ECF.
Advance Restaurant Finance, LLC Agave Environmental LLC Air Technology, Inc.
1550 Sawgrass Corporate Pkwy, Suite 300 4815 Vicksburg St. 206 Trinity Street
Sunrise, FL 33323-2820 Dallas, TX 75207-5211 Forney, TX 75126-8545
Atmos Energy Attorney for William Lee DeSanders aka Lee D Auto-Chlor Services, LLC
P.O. Box 650654 Arthur A. Stewart Dept 205
Dallas, TX 75265-0654 Thompson, Coe, Cousins & Irons, L.L.P. P.O. Box 4869
700 North Pearl, 25th Floor Houston, TX 77210-4869
Dallas, Texas 75201-2825
BJ Staten-Hambric Sports Management BSCH Management Company, LLC BSCH Management Company, LLC
2 Turtle Creek Ave. Suite 750 420 Decker Drive c/o Eli O. Columbus
Dallas, TX 75204-1635 Irving, TX 75062-3952 Winstead PC
1201 Elm Street, Suite 5400
Dallas, TX 75270-2199
Legacy Restaurant Group, Ltd. Legacy Restaurant Group, Ltd. Lenox Restaurant Group, Ltd.
2632 Freewood Drive 5760 Legacy Drive, Suite B-1 1103 Slocum Street
Dallas, TX 75220-2511 Plano, TX 75024-7103 Dallas, TX 75207-4220
Mighty Leaf Tea Mozzarella Company Nella Cutlery & Food Machinery
136 Mitchell Blvd. 2944 Elm Street 2225 Belt Line Road Suite 211
San Rafael, CA 94903-2044 Dallas, TX 75226-1509 Carrollton, TX 75006-5600
Case 09-33211-hdh11
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FiledCredit
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Plan Entered 07/14/09Opentable,
11:44:14 Inc. Desc Main
1815 Trinity Valley Dr. Document
P.O. Box 9020 Page 10 of 12 P.O. Box 49322
Carrollton, TX 75006-6510 Des Moines, IA 50368-9020 San Jose, CA 95161-9322
Prestige Wine Cellars, Inc. Preston Pierce Construction Co. Protection Networks
P.O. Box 816089 2100 McKinney Ave. Suite 1750 10840 Switzer Ave. No. 110
Dallas, TX 75381-6089 Dallas, TX 75201-6984 Dallas, TX 75238-1361
Recovery Management Systems Corporation Republic Beverage Co. Resource Flooring Group
25 S.E. 2nd Avenue, Suite 1120 P.O. Box 536389 Dept. 41
Miami, FL 33131-1605 Grand Prairie, TX 75053-6389 P.O. Box 21228
Tulsa, OK 74121-1228
Silveroak Holdings, Ltd. South Tex Wine Distributors, Inc. Sports Solutions, Inc.
4300 Lemmon Avenue P.O. Box 695 2536 Manana Road
Dallas, TX 75219-2705 Millican, TX 77866-0695 Dallas, TX 75220-1206
St. Paul Medical Center Stockyards Packing, Inc. Susan Combs, State Comptroller-Mixed Bev
P.O. Box 911400 72045 Eagle Way 111 East 17th Street
Dallas, TX 75391-1400 Chicago, IL 60678-0001 Austin, TX 78774-1440
Susan Combs, State Comptroller-Sales Tax Susan Combs, State Comptroller-Texas Fra (p)TXU ENERGY RETAIL COMPANY LP
111 East 17th Street 111 East 17th Street CO BANKRUPTCY DEPARTMENT
Austin, TX 78774-1440 Austin, TX 78774-1440 PO BOX 650393
DALLAS TX 75265-0393
Tarrant County The Frost National Bank The Frost National Bank
c/o Laurie A. Spindler c/o Hudson M. Jobe, Esq. c/o Teresa Woods
Linebarger Goggan Blair & Sampson, LLP Quilling Selander Cummiskey & Lownds, PC 4200 S. Hulen
2323 Bryan Street, Suite 1600 2001 Bryan Street, Suite 1800 Fort Worth, Texas 76109-4995
Dallas, TX 75201-2644 Dallas, Texas 75201-3070
The Pavilion onCase
Lovers09-33211-hdh11
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Warner CableDesc Main
4311 Oak Lawn Ave. Suite 400 Document Page
515 N. Interurban St. No. 103 11 of 12 P.O. Box 650063
Dallas, TX 75219-2363 Richardson, TX 75081-3363 Dallas, TX 75265-0063
Triple B Cleaning, Inc. Unique Lawn Service Watkins & Co., Inc.
P.O. Box 727 424 Roundabout Drive P.O. Box 271-017
Mexia, TX 76667-0727 Midlothian, TX 76065-3628 Houston, TX 77277-1017
William A. Frazell William Lee DeSanders a-k-a Lee DeSanders XAST Investments, Inc.
Assistant Attorney General Arthur A. Stewart, Esq. c/o Paula Anderson
Bankruptcy & Collections Division Thompson Coe Cousins & Irons LLP Kelsoe, Anderson, Khoury & Clark, PC
PO Box 12548 700 North Pearl St. 5220 Spring Valley Road, Suite 500
Austin, TX 78711 2548 25th Floor Dallas, Texas 75254-2466
Dallas, TX 75201-2825
XO Communications Services, Inc. Xast Investments, Inc. iBroadband of Texas
9201 N. Central Expressway P.O. Box 561527 P.O. Box 1360
Dallas, TX 75231-5916 Dallas, TX 75356-1527 Athens, TX 75751-1360
The preferred mailing address (p) above has been substituted for the following entity/entities as so specified
by said entity/entities in a Notice of Address filed pursuant to 11 U.S.C. 342(f) and Fed.R.Bank.P. 2002 (g)(4).
The following recipients may be/have been bypassed for notice due to an undeliverable (u) or duplicate (d) address.
(u)BSCH Management Company, LLC (u)Dallas County (u)Lenox Restaurant Group, Ltd.